Mon Feb 28, 2011 at 16:09:54 PM PST

As I wrote in my last post, the Republicans in the House have passed a budget to fund the government for the remainder of 2011. There are just days left for the House and Senate to send a budget to the President or face a government shut down. A large number of groups concerned about the agriculture appropriations in the bill have sent the following letter to the Senate, urging them to reject the House Republicans' budget. If there's one sentence that best sums up the complaints in the letter, it's this:

In a year of relatively high farm income, the House has focused its cuts instead upon programs that protect the environment, increase economic opportunity, serve beginning and minority farmers, and ensure proper nutrition for low-income families.

The letter leaves out another problematic result of the House budget: it is projected to shrink our 2012 GDP by 2 percent and could cost the country 700,000 jobs. If it happens, that will hit home for farmers and eaters alike.

The undersigned 154 organizations urge you to reject H.R. 1, the Continuing Resolution to fund the government for the remainder of fiscal year 2011, and to support a net freeze in discretionary
spending.

In its zeal to cut $60 billion dollars from fiscal year 2010 spending levels during the last 6 months of this fiscal year, the House has unfairly targeted agriculture and rural America for a disproportional share of the proposed cuts, and within agriculture has been particularly unfair to conservation, agricultural research, rural development, and beginning and minority farmers. The cuts are reckless and unjust, threatening economic recovery in rural communities struggling to create jobs, find new
markets, and renew economic life.

The House measure would cut a disproportionate $5.2 billion or 22 percent from the combined USDA and FDA budgets, compared to a 6 percent cut for the government overall or 14 percent for non-security spending. Even those numbers mask the size of the actual cut. The House also proposes deep cuts to mandatory conservation and renewable energy funding provided by the 2008 Farm Bill -- a combined $500 million would be cut under the House bill from the Conservation Stewardship Program, the Environmental Quality Incentives Program, Wetland Reserve Program, and the Biomass Crop Assistance Program. With those cuts included, the total cut to agriculture comes to $5.7 billion or 24.5 percent.

Despite the decision to re-open the 2008 Farm Bill and make cuts to mandatory programs in an appropriations bill, none of the cuts in the House bill are directed at the two the largest federal agricultural spending items -- commodity and crop insurance subsidies. In a year of relatively high farm income, the House has focused its cuts instead upon programs that protect the environment, increase economic opportunity, serve beginning and minority farmers, and ensure proper nutrition for low-income families.

Our nation's response to deficit spending must be evenhanded and equitable. The House has singled out a subset of programs that represent a fraction of the full agriculture budget and that are of particular importance to the sustainable agriculture community. For years we have struggled to achieve a fair share of federal farm spending and have made significant strides forward. H.R. 1 sets back this progress without any comparative evaluation of these programs based on need or effectiveness.

In our view, if cuts must be made then everything must be on the table. Cuts must be fair, equitable and made based on the merits of each program. Cuts to appropriations for USDA and FDA should not be disproportional to others parts of the government. Cuts to mandatory funding and the attendant loss of baseline used to determine future Farm Bill funding should be made by the Agriculture Committee in the context of the next Farm Bill or, if need be, in budget reconciliation. Ultimately, these are decisions that must be made in the context of a broader agreement to find savings in mandatory programs on a government-wide basis.

The House bill would not only make very major cuts in agricultural research and extension, rural development, and domestic and international feeding programs, but would also eliminate funding completely for a number of small programs of great importance to sustainable, organic, beginning and minority farmers. The National Sustainable Agriculture Information Service (ATTRA), Organic Transitions Research Program, Office of Advocacy and Outreach (to coordinate policy and outreach to beginning, women, and minority farmers), and the Office of Tribal Relations program would all be terminated. These are programs that with minimal resources are charged with serving the most chronically underserved segments of agriculture. Slating programs of such small means for termination suggests a motive that has little to do with deficit reduction. We urge the Senate to stand strong against such unjust and discriminatory cuts.

At a time of extremely tight credit markets and increased demand for Farm Services Agency (FSA) farm credit, H.R.1 would cut FSA Direct Operating loans by 10% or $100 million and Direct Farm Ownership loans by 27% or $175 million, and would completely eliminate funding for Conservation Loans. The majority of direct lending is targeted to beginning and minority farmers and ranchers although in these tough times many established farmers have had to turn to FSA direct loans to keep operating. Cuts to such an important source of credit in the countryside will only further delay economic recovery in rural America and we urge you to reject them.

H.R. 1 also cuts several USDA agency administrative budgets more severely than the programs they manage, raising the obvious question of how they could possibly manage and implement the programs with staff cuts of that magnitude. The result is that agencies will find it impossible to do their jobs effectively. We ask you to be more responsible in your efforts to find savings to reduce the deficit.

We urge you to take a more equitable, responsible and measured approach to deficit reduction. Agriculture and rural America should not suffer disproportionally and cuts within agriculture must not unfairly single out programs that serve sustainable, organic, beginning, and minority farmers. No cuts to mandatory farm bill spending should be made unless all mandatory spending is on the table for review and consideration based on need and effectiveness.

Ultimately, we need a comprehensive budget agreement that proceeds in a balanced way to reduce deficits. Until then, we urge you to not agree to a short-term meat ax approach that focuses on just a particular slice of government spending and threatens the economic recovery that might otherwise reduce deficits over the coming years. With just half a fiscal year remaining, a net freeze at the prior year's level would be a significant contribution toward a comprehensive deficit reduction plan.

Net farm income reflects income from production in the current year, whether or not sold within the calendar year; net cash income reflects only the cash transactions occurring within the calendar year. Net farm income is a measure of the increase in wealth from production, whereas net cash income is a measure of solvency, or the ability to pay bills and make payments on debt.

I wonder what are the forecasts are excluding cotton, corn, wheat, and soybeans. The numbers probably are in there, but I am so tired.

Ninety-seven percent of all farms specializing in the production of wheat, corn, soybeans, and cotton receive government payments. Net cash income represented 47 percent of household income for wheat farmers over 2000-2009, 61 percent for corn farmers, 67 percent for wheat farmers, and 91 percent for cotton producers. Among wheat, corn, soybean, and cotton farms receiving government payments:
...

In 2000-01, government payments represented nearly all net cash income for wheat, corn, and soybean producers and over three-fourths for cotton producers.

Since 2002, government payments have been half of net cash income for wheat, corn, soybean, and cotton producers. The ratio of government payments to net cash income appears to be more stable since the 2005 price spike generated by Hurricane Katrina.

Net farm income and net cash income include government payments. The above numbers don't say anything about the health of the part of our agriculture sector that doesn't receive government payments (or do they?), but I'm not encouraged.

EddieC posted a comment in the current Potluck thread about corn for ethanol, which prompted me to examine that ERS page again. Midst all the graphs and charts, despite all the many words of explanation and annotation, I didn't find one reference to ethanol subsidies. What's that about?

come under a different department? Department of Energy or Department of Transportation? I heard or read today (forget which) that ethanol is subsidized to the tune of 45 or 50 cents/gallon. Coincidentally, in Oregon at least, I pay 45 or 50 cents in taxes for every gallon of gas I buy.

Another thing that chaps my butt is the fact that you get less mileage with ethanol 'enhanced' gas. The more ethanol the lower your fuel economy. The lower the fuel economy the more gas you buy, the more gas you buy the more federal and state fuels taxes you pay.

ADM makes out like a bandit for producing the ethanol, farms make out like bandits because they have this huge new use for their corn, the government is subsidizing both the corn farmers, AND ADM, and get to look 'green' in the process while also forcing us into buying fuels that cause us to burn more and pay more taxes.

According to Congressional Quarterly, Baucus "split the difference..."

What was the Baucus package?

According to Congressional Quarterly, Baucus "split the difference, reducing the ethanol blenders' credit to 36 cents per gallon from the current level of 45 cents per gallon, cutting a small producer's credit to 8 cents per gallon from the current 10 cents, and extending the import tariff at its current rate of 54 cents per gallon."

What a way to split the difference. Anyway, to the extent that the industry is driven by tax credits, farmers don't get the money directly, but they benefit from demand for their crop. I still don't know if there are USDA programs.

By the way, this extravagant waste supposedly is being done to reduce petroleum imports, but there's a 54 cent per gallon tariff on imported ethanol? I didn't know that. Who's kidding (or abusing) whom? But again, farmers benefit from an artificially imposed restriction on competition.

By the way, I only quoted about the Baucus proposal, I don't know what actually was enacted. Also, I have no clue what the blenders' credit means. Is that a credit per gallon of ethanol, or a credit per gallon of blended fuel? The difference would be huge.

Moody's chief economist, Mark Zandi, projected that the House proposal would cut real GDP growth by 0.5 percent in 2011 and 0.2 percent in 2012.

Zandi does not say GDP will shrink, he says the growth rate will shrink. For 2012, the growth slowdown is estimated to bed 0.2%, not 2%.

The Politico writer does say that the cuts

could cost the country as many as 700,000 jobs by the end of next year

which is accurate but not clear. This does not mean that existing jobs would disappear. Again, Zandi is estimating a decline in growth.

That, in turn, would lead to 400,000 fewer jobs being created than expected by the end of this year and a total of 700,000 fewer jobs by the end of 2012.

A 2% number re economic growth in the middle of 2011 is found in the reference to a Goldman Sachs report.

A Goldman Sachs analysis released last Wednesday also concluded that Republicans' 2011 cuts would be detrimental to the economic recovery. The House GOP's plan, the analysis found, could cut the nation's economic growth by 1.5 percent to 2 percent during the second and third quarters of this year.

It's really too bad to have such a blunt instrument approach to budget cutting. I certainly agree with the premise that we need to decrease our debt (and increase our productivity, by the way), but it seems that Congress is just taking the Fire-Aim-Ready approach.

And to do this at the expense of the many farm families who are just barely scraping by is really inexcusable. We could unleash a whole new era of productivity in rural America with broadband and good support of economic evolution, just as electifying the countryside in the 1930s was revolutionary.